Monthly Archives: June 2015

Yesterday’s 350 point loss on the realization that a deadline was looming for Greece and the European Union to come to some kind of a short term agreement was, as these things usually are, well overblown.

I’m not necessarily of the belief that the market is entitled to just keep going higher and higher and I would like to see some kind of correction and ensuing increase in volatility, but yesterday’s action wasn’t really warranted.

The situation in Greece is also not the kind of thing that should be expected to supress our own markets for very long as, if anything, instability in Europe just makes us a better alternative, in the same way that the introduction of Quantitative Easing by the ECB made Europe a better investing alternative.

There can be no sane person who would have thought that a solution to the Greek debt crisis would come at any time other than at the 11th hour. To have waited until then to express surprise by dumping stocks doesn’t make too much sense, particularly if you still hold onto the belief that the market is a discounting mechanism.

This morning there’s some guarded optimism that a solution, at least for the current problem of a payment due to the ECB, may be at hand. Of course, that still leaves a payment that will be due to the IMF in about a month and it leaves a bigger picture of just what happens if Greek debt is written down or forgiven, as the Greek government believes is appropriate, to the other debtor nations in the EU.

For the EU, Greece itself is small potatoes, but what it may unleash could be the real thing.

The market has a long way to go if it’s going to erase yesterday’s 350 point loss. This morning’s pre-open futures indicated that it may at least try, but that attempt wouldn’t even be close to recapturing the losses even if it had been able to be sustained throughout the session.

Which it wasn’t

While a triple digit gain in the futures would ordinarily be a reason to feel optimistic, this morning it could only raise the quetion of “that’s all?”

While yesterday’s decline was the largest in quite a while, it is emblematic of a market that has alternated between ups and downs and made little net movement in 2015. Yesterday’s loss wiped out index gains for 2015. While for a single day a 350 point decline is big, if that was your margin between a gain and a loss after 6 months, you really didn’t accomplish too much in the course of those 6 months.

And when the 6 months did come to its end at the end of today’s trading, you really do have to wonder why all of that energy was expended to end up having gone nowhere.

With a little bit of cash still remaining after actually having made a purchase yesterday, I would be more than content to sit back and let the market regain whatever it could and just bring us to Thursday’s sentinel event; the Employment Situation Report.

Unfortunately, it didn’t regain too much today and so that still leaves Thursday.

There
‘s reason to believe that the employment statistics will again reflect a strengthening economy and that could easily upset those worried about interest rates.

But that’s another issue where you have to wonder what it is that will catch anyone by surprise. Janet Yellen has more than telegraphed that an interest rate increase will be coming and that it will likely be small and it would be an automatically recurring one.

So why panic?

Why not discount the high likelihood that the rate increase will happen and just move on?

I know that there’s no answer to that question, but it is a continually frustrating one especially when it’s so apparent that there’s limited capability of learning from the past.

At least we’ll have earnings season beginning once again to maybe act as a counter-balance to external events and get stocks to react to fundamentals, even if only for a short while.

Yesterday’s 350 point loss on the realization that a deadline was looming for Greece and the European Union to come to some kind of a short term agreement was, as these things usually are, well overblown.

I’m not necessarily of the belief that the market is entitled to just keep going higher and higher and I would like to see some kind of correction and ensuing increase in volatility, but yesterday’s action wasn’t really warranted.

The situation in Greece is also not the kind of thing that should be expected to supress our own markets for very long as, if anything, instability in Europe just makes us a better alternative, in the same way that the introduction of Quantitative Easing by the ECB made Europe a better investing alternative.

There can be no sane person who would have thought that a solution to the Greek debt crisis would come at any time other than at the 11th hour. To have waited until then to express surprise by dumping stocks doesn’t make too much sense, particularly if you still hold onto the belief that the market is a discounting mechanism.

This morning there’s some guarded optimism that a solution, at least for the current problem of a payment due to the ECB, may be at hand. Of course, that still leaves a payment that will bve due to the IMF in about a month and it leaves a bigger picture of just what happens if Greek debt is written down or forgiven, as the Greek government believes is appropriate, to the other debtor nations in the EU.

For the EU, Greece itself is small potatoes, but what it may unleash could be the real thing.

The market has a long way to go if it’s going to erase yesterday’s 350 point loss. This morning’s pre-open futures indicate that it may at least try, but that attempt wouldn’t even be close to recapturing the losses.

While a triple digit gain in the futures would ordinarily be a reason to feel optimistic, this morning it may only raise the quetion of “that’s all?”

While yesterday’s decline was the largest in quite a while, it is emblematic of a market that has alternated between ups and downs and made little net movement in 2015. Yesterday’s loss wiped out index gains for 2015. While for a single day a 350 point decline is big, if that was your margin between a gain and a loss after 6 months, you really didn’t accomplish too much in the course of those 6 months.

With a little bit of cash still remaining after actually having made a purchase yesterday, I would be more than content to sit back and let the market regain whatever it could and just bring us to Thursday’s sentinel event; the Employment Situation Report.

There’s reason to believe that the employment statistics will again reflect a strengthening economy and that could easily upset those worried about interest rates.

But that’s another issue where you have to wonder what it is that will catch anyone by surprise. Janet Yellen has more than telegraphed that an interest rate increase will be coming and that it will likely be small and it would be an automatically recurring one.

So why panic?

Why not discount the high likelihood that the rate increase will happen and just move on?

I know that there’s no answer to that question, but it is a continually frustrating one especially when it’s so apparent that there’s limited capability of learning from the past.

At least we’ll have earnings season beginning once again to maybe act as a counter-balance to external events and get stocks to react to fundamentals, even if only for a short while.

It may be a good thing that this is going to be a holiday shortened week.

It may be a week of bookends, as the week was getting off to a very negative start on news yesterday of Greece closing its banks to avoid a run on deposits. The week will end on Thursday, as the Employment SItuation Report will be released and could revive fears of an interest rate increase again.

This morning’s pre-open futures were pointing to a nearly 200 point decline on the DJIA, but that represented a much better state than was the case yesterday evening as the DJIA was down 300 points.

Too bad that didn’t matter, as even a 300 point loss would have been better than the eventiual 350 point loss.

It’s hard to believe that the situation this morning would have been unexpected, as it’s difficult to point to a single situation over the years that has had a hard deadline but where a resolution occured well in advance of that deadline.

In this case the hard deadline in July 1, but the difference may be that even with two days remaining until that deadline, it doesn’t look as if a solution will be achieved in time. It’s not easy for the Greek government to come to an agreement with its creditors by July 1st, if it’s calling for a referendum by its citizens on July 5th.

So that’s what we will be dealoing with as the week was ready to begin.

While most everyone believes that we are long overdue for a correction, somehow I don’t believe that this will end up being the precipitating factor. Despite a terrible day in overseas markets, including the Chinese markets that are having their own issues, this sort of worldwide weakness usually drives investors to safety and that means money flowing into the US.

Of course, first you have to get over the initial shock of what shouldn’t have been a shock to anyone.

Following that initial shock, we are now about 4% lower on the S&P 500. That’s almost mini-correction territory.

With a little more cash on hand after a single assignment last week, but with only two positions set to expire this week, it looked like another very quiet week of trading ahead as the morning started.

It’s not easy to imagine that this week could be even quieter than last week, but it was certainly within the realm of possibility, particularly with one less day of trading opportunity.

Even with weakness this morning, which can be tempting to want to take advantage of, it may not be the opening to do so. If doing so, the question may become one of deciding between the trading week shortened premiums available this week or using an extended weekly option.

However, since I want to retain cash, or at least have a decent chance of recycling it so that it can also be used next week, it may be better to take the paltry premiums available this week, which may get a little bump higher from the added volatility this morning.

Still, my prevailing mood is one of penury. I don’t really want to be spending down the cash reserve.

With that mindset, the trade in Cisco, to capture its dividend, looked good, until the market decided to begin a second phase downward.

Now, after having made that trade and watching the DJIA move down about another 200 points from the time of that trade, I really don’t want to be spending down what remains of the cash reserve. That’s especially true as Thursday’s Employment Situation Report could be the second of this week’s one – two punch and it’s not easy justifying why you would take on additional risk in advance of what is known to be a sensitive area and one that has provoked some fear when it has given good news.

The expectation has to be for more of the good news to continue and that would be likely met in a pessimistic way by those who have been sensitive to the prospects of rising interest rates.

For now, that means the entire market. But just as they will be able to get past the European banking crisis and the possible loss of an EU member nation, they’ll learn to get over a small, non-recurring increase in interest rates, especially if next week’s earnings get off on the right foot.

It may be a good thing that this is going to be a holiday shortened week.

It may be a week of bookends, as the week is getting off to a very negative start on news yesterday of Greece closing its banks to avoid a run on deposits. The week will end on Thursday, as the Employment SItuation Report will be released and could revive fears of an interest rate increase again.

This morning’s pre-open futures are pointing to a nearly 200 point decline on the DJIA, but that represents a much better state than was the case yesterday evening as the DJIA was down 300 points.

It’s hard to believe that the situation this morning would have been unexpected, as it’s difficult to point to a single situation over the years that has had a hard deadline but where a resolution occured well in advance of that deadline.

In this case the hard deadline in July 1, but the difference may be that even with two days remaining until that deadline, it doesn’t look as if a solution will be achieved in time. It’s not easy for the Greek government to come to an agreement with its creditors by July 1st, if it’s calling for a referendum by its citizens on July 5th.

So that’s what we will be dealoing with as the week is ready to begin.

While most everyone believes that we are long overdue for a correction, somehow I don’t believe that this will end up ebing the precipitating factor. Despite a terrible day in overseas markets, including the CHinese markets that are having their own issues, this sort of worldwide weakness usually drives investors to safety and that means money flowing into the US.

Of course, first you have to get over the initial shock of what shouldn’t have been a shock to anyone.

With a little more cash on hand after a single assignment last week, but with only two positions set to expire this week, it looks like another very quiet week of trading ahead.

It’s not easy to imagine that this week could be even quietr than last week, , but it’s certainly within the realm of possibility, particularly with one less day of trading opportunity.

Even with weakness this morning, which can be tempting to want to take advantage of, it may not be the opening to do so. If doing so, the question may become one of deciding between the trading week shortened premiums available this week or using an extended weekly option.

However, since I want to retain cash, or at least have a decent chance of recycling it so that it can also be used next week, it may be better to take the paltry premiums available this week, which may get a little bump higher from the added volatility this morning.

Still, my prevailing mood is one of penury. I don’t really want to be spending down the cash reserve.

That’s especially true as Thursday’s Employment Situation Report could be the second of this week’s one – two punch and it’s not easy justifying why you would take on additional risk in advance of what is known to be a sensitive area and one that has provoked some fear when it has given good news.

The expectation has to be for more of the good news to continue and that would be likely met i
n a pessimistic way by those who have been sensitive to the prospects of rising interest rates.

For now, that means the entire market. But just as they will be able to get past the European banking crisis and the possible loss of an EU member nation, they’ll learn to get over a small, non-recurring increase in interest rates, especially if next week’s earnings get off on the right foot.

MONDAY: Although the pre-opening futures aren’t as bad this morning as they were yesterday evening as the Greek debt crisis will be coming to a head, it will be a day to strap on, as the opening day of a shortened week isn’t looking very welcoming

TUESDAY: It will take an awfully big bounce to make up for yesterday’s 350 point loss. The pre-opening futures are making an attempt, as today is the day that Greece must decide whether to come to an agreement with its lenders, although the story could start anew next month as more money is due.

WEDNESDAY: So Greece is now in default, but maybe a deal can be made? At least that’s what may be lifting the market this morning, but if the futures gains do hold, as yesterday’s didn’t, it’s still a long way from voiding Monday’s plummet.

THURSDAY: The pre-open futuers are quiet ahead of this week’s early Employment Situation Report, as the real excitement may not begin until Monday, when the results of the Greek referendum become known.